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Pending home sales fell 4.3 per cent month-over-month in December, according to the latest release from NAR. This missed expectations for the index to stay flat.
Stocks declined on the news.
Last month’s number was revised down to 1.6 per cent.
For the year, December pending home sales were up 6.9 per cent.
In a press release, NAR chief economist Lawrence Yun said that supply limitation is the biggest obstacle to contract signings in the last month.
“Supplies of homes costing less than $100,000 are tight in much of the country, especially in the West, so first-time buyers have fewer options,” he said. “We expect a seasonal rise of inventory in the spring to help, but a seller’s market may be developing. Much of the West is already a seller’s market for homes priced under a million dollars, but conditions are much more balanced in the Northeast.”
A regional breakdown shows that the index was down 5.4 per cent in the Northeast, the Midwest index was up 0.9 per cent. In the South it was down 4.5 per cent, and in the west it tumbled 8.2 per cent.
Investors care about the index because it acts as a leading indicator of existing home sales activity. By definition a pending sale refers to one in which a contract was signed but not closed.
Here is a chart showing a change in pending home sales index since 2007:
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